More changes to come at Adirondack Health

Nursing homes, dialysis could be outsourced; New health center planned

April 6, 2013

SARANAC LAKE - The conversion of the emergency room at Adirondack Medical Center-Lake Placid to an urgent care center, if it happens, may not be the only change coming for Adirondack Health, and the patients and communities that depend on its services.

Hospital officials are considering a long list of cost-cutting and revenue-generating proposals to shore up the organization's bottom line. They include working with outside agencies or companies to run the organization's two nursing homes and dialysis operations, offering new medical treatments and services, and opening a new health center in Saranac Lake.

The need for these and other changes is being driven by what Adirondack Health's leaders say is an ongoing and fundamental shift in health care and how it's funded.

In an interview Thursday, Adirondack Health President and CEO Chandler Ralph said the organization is facing a financial crunch brought on by several things. She said the Affordable Care Act - known as Obamacare - included $155 billion in cuts to hospitals across the country over 10 years.

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"Every year we have continuing cuts going on as a result of that," she said. "Then you couple that with the fiscal cliff cuts that we got, which were $1.2 million, and the sequestration of 2 percent across the board. That's half a million dollars for us."

The $1.7 million in cuts came primarily in through reductions in Medicare payments, which account for 50 percent of Adirondack Health's revenues. The unexpected loss of so much money at the start of the year recently led the organization to lay off 18 full-time employees and reduce the hours of another 15 full- and part-timers.

In addition to these losses, Ralph said big changes in how health care is delivered across the country continue to cut into the organization's margins. For example, Adirondack Health is involved in a medical home demonstration project, which is focused on preventative health and keeping people out of the hospital and emergency room.

"The good news is it's great for patients," Ralph said. "The bad news is, obviously our revenue is reduced. We knew that going in, but it's the right thing for the patient and the right thing for the nation. ... But it's like we're standing with one foot on a boat and one foot on a dock, because the reimbursement changes have not caught up with how we're changing the system."

Given these financial challenges and changes, Ralph said Adirondack Health has to look at ways to do things differently.

"We're looking at a number of different projects," Ralph said. "One of those projects is, does it make sense to continue to have an ER in Lake Placid that's 11 miles from this ER here?"

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Nursing homes

Adirondack Health is also taking a close look at its two nursing homes, Uihlein Living Center in Lake Placid and Mercy Living Center in Tupper Lake. It acquired them on Jan. 1, 2007 from the Sisters of Mercy.

Ralph said 85 percent of the nursing homes' revenue comes from Medicaid. However, daily Medicaid reimbursement rates have not kept par with expenses, and that has cost Adirondack Health millions of dollars over the past few years.

"It's been substantial," Ralph said.

As a result, Ralph said the organization is looking at "three or four options" for its nursing homes.

"There is a regional effort for all the nursing homes (in the North Country) to come together under one organization," Ralph said. "We're just starting to talk about this. We're going to do a study and see if it makes sense. That may be one way to save long-term care for our residents."

Another option is to reduce the number of beds at the nursing homes, something that started last year at Uihlein. Adirondack Health is working to get Uihlein's census from 120 to 60; it's currently at 81, Ralph said. The plan announced last year also includes partnering with another organization to offer assisted living and senior housing on the Uihlein campus. Ralph said those talks are continuing.

Mercy Living Center has a capacity for 60 beds; Ralph said there are currently 51 residents there and they plan to keep the facility's census at that number, for now.

Given the losses it's sustained from the nursing homes, the Enterprise asked Ralph if she would have made the same decision today to acquire them. She responded by quoting retired U.S. Supreme Court Justice Sandra Day O'Connor when she was asked a similar question.

"There's absolutely nothing to be gained by looking back," Ralph said. "You have to look forward, and that's where my energy is going."

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Dialysis

When the Enterprise asked Ralph about some of the other cost cutting and revenue generating changes it's considering, she walked over to her desk and picked up a copy of the organization's Recovery Action Plan. It has nearly 40 items, she said.

One of the proposals is looking at different options for dialysis services, which are offered at AMC-Saranac Lake and Mercy Living Center. Like many other dialysis units around the country, Ralph said Adirondack Health's operate at a loss.

"Many hospitals are selling their renal dialysis units to private, national for-profit companies like CVPH just did," Ralph said. "Does that make sense for us? I don't know. Does it make sense to run two renal units? We have to look at that."

Ralph said Adirondack Health officials are talking to three dialysis companies they could outsource those services to, including American Renal Associates, the company that's partnering with CVPH.

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Saranac Lake clinic

A new Saranac Lake Health Center is planned on the second floor of the new Wound and Hyperbaric Treatment Center building off of Old Lake Colby Road. Ralph said it could open in the next few months.

Like Adirondack Health's Lake Placid and Tupper Lake health centers, the Saranac Lake center will be home to offices of local primary care doctors and nurse practitioners. Several doctors who already work in the area or are relocating here have expressed an interest in the office space, Ralph said.

"It's just a move to outpatient care," said Dr. John Broderick, the organization's chief medical officer. "That's where the business is going. That's where the lower cost is and the higher quality. In addition, we'll see what happens in 2014 (when a requirement that all U.S. citizens have health insurance takes effect). Perhaps there's going to be a lot more people insured as well."

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Other projects

Ralph said other projects in the organization's Recovery Action Plan include offering new medical procedures or expanding existing ones, like providing endoscopy services on Saturdays twice a month. Enrolling in a federal discount drug program, transitioning all laundry services to Uihlein Living Center, cutting back weekend and evening hours in the AMC-Saranac Lake cafeteria and combining the medical and surgical floors at the Saranac Lake hospital, due to a dropoff in in-patient admissions, were also named.

"Those are the types of things we're looking at," Ralph said. "Some are $20,000 and $30,000 (in savings), but eventually they do add up."

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The goal

Ralph said the overall goal is have an operating margin of 1 percent or roughly $1 million. It wasn't clear what Adirondack Health's margin is now, but it's not 1 percent.

"We're a $100 million organization," Ralph said. "We would be jumping for joy with a 1 percent operating margin. If you were any other business other than health care, you would be appalled at that low of an operating margin. In New York state, with 62 percent of the hospitals losing money from operations, we'd be ecstatic with 1 percent, which is about $900,000 to $1 million, and that's our goal."